B.C. shows reducing GHG emissions will be difficult
It is an article of faith among carbon tax advocates that British Columbia is a model for how a carbon tax can both sustain economic growth and reduce greenhouse gas (GHG) emissions. This belief is based on studies rushed out shortly after the province introduced a modest carbon tax in 2008, many from the university of Ottawa’s Smart Prosperity Initiative (which itself prospered smartly in terms of funding after Justin Trudeau was elected). The preliminary results seemed “miraculous” as a small tax on energy apparently had little negative effect on the economy but a large impact on reducing GHG emissions. Some researchers, including myself, urged caution in interpreting results based on a very small sample that contradicted a vast body of literature showing energy demand is not very responsive to price changes.
The accumulation of several years’ more data shows caution was appropriate: B.C.’S carbon tax had little impact on slowing either economic growth or GHG emissions — as should have been expected from a small change in a tax on energy, especially given the plunge in oil prices after 2014. real GDP growth in B.C. has led the nation over the past decade, rising 28.9 per cent versus the national average of 20.8 per cent. Much of the growth was concentrated in the housing sector, which had a lot to do with an inflow of people and money from abroad and not much at all with provincial taxes.
Meanwhile, GHG emissions in B.C. rose 9.0 per cent between 2009 and 2017 (the latest year for Statcan data). This is well above the national average of 5.9 per cent — which includes significant declines in five provinces. Every passing year confirms that emissions are accelerating in B.C. They are up 5.4 per cent since 2012 versus just 1.0 per cent in the rest of Canada. The development of an LNG mega-project will reinforce this upward trend, even if it helps lower emissions from coal-burning power plants in Asia.
The largest drops in emissions were in Ontario, Nova Scotia and New Brunswick, mostly after the 2012 cut-off date for many of the initial studies trumpeting “miraculous” results for B.C. All three provinces ordered their utilities to reduce coal use in electricity generation. This suggests regulation can be an effective tool in lowering emissions without raising a carbon tax. Some will argue these regulations are more costly than a carbon tax, but in 2001 Ontario’s stated goal in switching from coal- to gas-burning power plants was to raise air quality not lower GHG emissions. It likely would have proceeded even if regulation had cost more than a carbon tax.
The big picture for the first decade after the B.C. carbon tax was introduced makes sense to economists. A small tax on carbon, smacking more of tokenism than an attempt to fundamentally change consumer behaviour, had little effect on either the economy or GHG emissions. That’s why researchers like ubc’s Mark Jaccard says a tax on carbon will have to be much higher, more like $200 a tonne, to help Canada reach its Paris climate targets for 2030, a fact of life the federal government is beginning to acknowledge after long having disingenuously pretended that ambitious emission goals could be achieved at little cost to the economy.
Economists have always stressed the key role energy consumption has played in raising living standards over the long term. The history of energy consumption has been the relentless search for and discovery of ever-cheaper energy sources, from wood and coal in the 19th century to oil and gas in the 20th. A 2017 article in Policy Options concluded that “since 2009, there has been a very strong correlation between the increase in GDP and the increase in emissions.” Breaking that correlation will be costly and difficult, despite early assurances from academics that B.C.’S experience showed it could be painless and inexpensive. It was always hard to believe that a sharp increase in the price of fossil fuels would not have a significant dampening effect on our economy unless fossil fuels were replaced by even cheaper sources of energy, a substitution made more difficult by slumping oil and gas prices since 2015.
People are welcome to advocate policies to slow climate change, but they cannot pretend there will not be a price to pay. If you really want to reduce fossil fuel consumption, you should be honest with people about the economic sacrifices they are being asked to make. Although advocates of climate change policies resist the idea, our fossil fuel-based infrastructure dictates that there really is a trade-off between the economy and the environment. B.C.’S experience since 2008 shows that reducing emissions will require much more than just the small carbon tax early studies suggested.
b.c.’s carbon tax had little impact on slowing either economic growth or ghg emissions.